Dynamic risk measure
What is dynamic risk measure?
This is a risk measure which looks at how risks at different times are related. It can also be interpreted as a sequence of conditional risk measures.
Where have you heard of dynamic risk measure?
You might have heard of it as part of financial risk modelling which aims to determine the risk of a financial portfolio.
What you need to know about dynamic risk measure.
Risk measures are designed to determine the minimum capital reserves required for financial institutions to ensure their financial stability. Conditional risk measures were designed as an extension to these ordinary static risk measures, because they take into account the information available at the time of the risk assessment. This means they can be updated over time as new information becomes available. A combination or sequence of these conditional risk measures is known as a dynamic risk measure.
Find out more about dynamic risk measure.
To learn more about this type of calculation, check out our guide to coherent risk measure.